Has Indonesia Hit the Nickel Jackpot?

Indonesia has 42% of the world's supply of nickel, a key component in electric vehicle batteries. It has struck deals with Tesla and is leveraging the resource to boost its economy. But the strategy is risky, relying on dirty and dangerous practices-and an uncertain EV market.

- GREGOR STUART HUNTER

IN MID-2020, AN EXASPERATED Elon Musk appealed for greater access to a commodity crucial to electric-vehicle battery production. "Any mining companies out there, please mine more nickel, okay?" he said on an earnings call. "Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way."

The Tesla CEO soon found a supplier that could fulfill at least part of his request. In 2022, the EV maker struck a $5 billion deal to source nickel from Indonesia. The Muslimmajority archipelago of 280 million people has a landmass three times the size of Texas, scattered across an island chain spanning a distance comparable to that between San Francisco and Bermuda in the mid-Atlantic. Buried beneath its mangroves, ancient rainforests, and active volcanoes is the world's largest reserve of nickel: 42% of the global supply. The metallic element is a component crucial to rechargeable batteries including those in EVs-and to the world's overall green transition.

As the EV sector has boomed, Indonesia's government has sought to leverage this stockpile to jump-start its high-value manufacturing sector and stoke its economy. The strategy has already proved lucrative, but cashing in on the sought-after resource comes with challenges: Extracting it from the earth is a dirty, dangerous business. And sagging sales of EVs worldwide suggest that nickel, the resource one of the world's richest men begged for a few years ago, may not be an easy pathway to prosperity.

EVER SINCE DUTCH colonists first discovered nickel in Indonesia in the early 1900s, it's been at the center of battles over who gets to mine and sell it. In the past decade, the Indonesian government has set out an ambitious development plan that would give it definitive control over nickel and other commodities.